African governments are moving towards establishing a regional financial mechanism to protect public infrastructure from the growing fiscal impact of climate and disaster-related shocks.

The move followed the inaugural Climate and Disaster Risk Financing and Insurance Africa Forum, a two-day meeting in Nairobi attended by representatives from 21 countries, governments, insurance regulators, development partners and industry stakeholders.

Participants examined ways to strengthen financial preparedness for floods, droughts, cyclones and other hazards that increasingly threaten public infrastructure and development gains. They agreed to advance insurance and regional risk-pooling mechanisms as part of efforts to reduce governments’ financial exposure when disasters occur.

The forum mandated ZEP-RE, the COMESA specialised institution and pan-African reinsurer, to support the design, establishment and operationalisation of a thematic risk pool that would provide insurance capacity for public infrastructure exposed to climate and disaster risks.

The proposed mechanism would help participating governments assess their exposure, identify risks and assets suitable for pooling, and establish financial protection arrangements before disasters occur.

Hope Murera, Managing Director and Group Chief Executive Officer of ZEP-RE, said countries had called for financial protection capable of safeguarding public assets before disasters strike. She said ZEP-RE would support governments in assessing their exposure and determining how risks could be pooled.

The initiative comes as African governments face increasing pressure to fund emergency response, reconstruction and recovery following climate-related disasters. Damage to roads, hospitals, schools, water systems, energy infrastructure and other public assets can force governments to redirect already constrained resources towards recovery, potentially delaying planned investments and affecting essential services.

The scale of the continent’s protection gap was highlighted at the Nairobi forum, where participants heard that Africa currently insures only about 3% to 5% of its disaster losses, compared with roughly 40% globally. Governments therefore absorb most of the losses, estimated at between $7 billion and $15 billion.

The exposure extends beyond the insurance sector because public infrastructure represents long-term economic investment. Repeated climate shocks can damage transport networks, electricity systems, water infrastructure, health facilities and other assets needed for economic activity.

ZEP-RE has identified protection of critical public infrastructure as an important element of strengthening resilience and reducing the fiscal impact of catastrophic events.

The proposed risk pool would form another layer of broader disaster risk financing strategies. Instead of depending mainly on emergency budget allocations after disasters occur, governments could use pre-arranged financial mechanisms to access resources closer to when they are needed.

Participants also discussed combining insurance with risk reduction, adaptation, climate information systems and sound public financial management.

Reliable risk data will be central to the operation of any regional mechanism. Forum participants identified national and regional risk data, stronger analytical and modelling capabilities, and insurance products suited to African markets as important requirements for closing the continent’s protection gap.

Information on the location and vulnerability of public assets can help governments and insurers estimate potential losses, establish appropriate coverage, and determine pricing and risk-transfer structures.

Climate risks also extend beyond national borders, while individual national insurance markets may not always have enough scale or capacity to absorb large and correlated losses. Regional pooling could provide greater diversification and underwriting capacity, although its effectiveness would depend on the quality of participating countries’ risk information, regulatory coordination, financial arrangements and implementation capacity.

The proposed mechanism builds on commitments under the Zanzibar Declaration on Financial Protection of Critical Public Infrastructure. ZEP-RE’s 2025 annual report states that the organisation contributed to the declaration through the East Africa Insurance Supervisors Association, alongside work on national disaster risk financing frameworks, asset registers and risk financing structures.

Governments participating in the Nairobi forum also launched a peer-to-peer Community of Practice on Climate and Disaster Risk Finance and Insurance in Africa.

The platform is designed to enable countries to exchange tested approaches while strengthening technical and institutional capacity as governments develop and implement national disaster risk financing strategies.

Kenya’s National Treasury Principal Secretary for Economic Planning, Dr Boniface Makokha, said the Community of Practice would enable participating countries to voluntarily share approaches to developing national disaster risk financing strategies. These include pre-arranged financing for critical infrastructure, regulatory alignment and complementary regional risk-pooling mechanisms.

For the insurance industry, the initiative could create opportunities to develop products tailored more closely to the risk profiles of African governments. Expanding insurance capacity, however, will require continued cooperation among governments, regulators, reinsurers, development institutions and private insurers.

ZEP-RE has identified collaboration, improved data, regulatory alignment and innovation as important conditions for expanding insurance solutions and reducing the continent’s protection gap.

Regional institutions are expected to play an important role as the proposed pool progresses from concept to implementation. ZEP-RE already operates across multiple African markets and has a mandate that includes creating and administering insurance pools for the benefit of regional insurance markets.

The Nairobi discussions also reflected a broader shift in the treatment of climate resilience within public finance. Rather than treating disaster response solely as emergency expenditure, governments are increasingly examining financial instruments that can be arranged in advance to protect public balance sheets and maintain development spending after climate shocks.

For Africa, where infrastructure deficits remain significant and climate-related hazards can affect several countries simultaneously, regional financial protection mechanisms could form part of long-term resilience planning.

The proposed pool will still need to progress beyond institutional commitments to practical systems covering asset identification, risk modelling, regulatory coordination, capitalisation and claims arrangements.

Protazio Sande, Interim Chairperson of the East Africa Insurance Supervisors Association and Acting Chief Executive Officer of Uganda’s Insurance Regulatory Authority, urged participating countries to turn the forum’s commitments into concrete measures.

He called on each delegation to undertake at least one action after the meeting and report on progress when participants next convene.

The next stage will focus on implementation, including establishing reliable information on exposed public assets, determining suitable levels of financial protection and incorporating insurance and other pre-arranged financing mechanisms into national disaster risk strategies.

Insurers and reinsurers will also need to develop the capacity and products required to reflect the scale and complexity of Africa’s climate risks.

The proposed regional risk pool reflects a broader recognition that climate resilience requires financial preparedness alongside physical adaptation. Translating the Nairobi commitments into functioning risk-transfer mechanisms would give governments an additional tool for protecting public infrastructure, limiting fiscal disruption and maintaining essential services when climate and disaster shocks occur.

Source: africasustainabilitymatters